Reference no: EM132671282

Blue Company sold 30,000 units of its only product and incurred a $85,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2020's activities, the production manager notes that variable costs can be reduced 25% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $175,000. The maximum output capacity of the company is 55,000 units per year.

Blue Company
Contribution Margin Income Statement
For Year Ending December 31, 2019

Sales                             $900,000
Variable                        $680,000
Contribution Margin        $220,000
Fixed Cost                   $305,000
Net Loss                     $(85,000)

Problem 1: Compute the break-even point in dollar sales for year 2019. (Round your answers to 2 decimal places.)

Problem 2: Compute the predicted break-even point in dollar sales for year 2020 assuming the machine is installed and there is no change in the unit selling price. (Round your answers to 2 decimal places.)